What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-15 · 61 added, 41 removed, 69 unchanged (60% of the section changed)

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We have historically financed our operations primarily through issuances of equity securities.

As of March 31, 2026, we have raised approximately $105.3 million in gross proceeds through the sale of our equity securities.

As of June 30, 2026, we have raised approximately $109.2 million in gross proceeds through the sale of our equity securities.

We may need to raise additional capital in the future, however, the significant volatility in the capital markets may negatively affect our ability to raise this additional capital.

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Recent Developments

Advancement Claim

On January 16, 2026, the Former Directors filed a petition for advancement (case number 2026-0082-CDW) in the Delaware court of Chancery for an advancement of legal fees relating to a request, by us, for the Former Directors to return material generated by the Special Committee, which was dissolved following our 2025 annual meeting of stockholders.

The advancement proceeding effectuated an advancement of monies to the Former Directors counsel for monies incurred to represent the Former Directors in this matter.

The advancement proceeding followed a prescribed court process where the legal fees were reviewed to determine a reasonable amount payable to the Former Directors’ counsel for representation in this matter.

We do not believe this advancement claim will have a material adverse effect on the future operations of the Company, and we do not anticipate any additional claims for advancement of legal fees in this case in the future.

The total advancement claim amounted to $319 thousand, of which $180 thousand was accrued during the three months ended December 31, 2025.

We delivered the full amount of the advancement claim to their legal counsel during the three months ended March 31, 2026.

Reverse Stock Split

On February 26, 2026, at our special meeting of stockholders, our stockholders approved a certificate of amendment to our certificate of incorporation, as amended (a “Charter Amendment”) to effect a reverse stock split of our outstanding shares of common stock at a ratio to be determined by the Board (the “Reverse Split”).

On March 6, 2026, we filed a Charter Amendment with the Secretary of State of Delaware to effect a 1-for-10 Reverse Split of our outstanding shares of common stock as of 12:01 a.m.

Eastern Time on March 16, 2026, in order to regain compliance with Listing Rule 5550(a)(2) of The Nasdaq Stock Market LLC (“Nasdaq”).

Nasdaq Bid Price Compliance

On March 30, 2026, we received a letter from Nasdaq stating that, because our shares of common stock had a closing bid price at or above $1.00 per share for a minimum of 10 consecutive business days, we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2), and that the matter is now closed.

Public Offering

On May 28, 2026, we entered into an underwriting agreement (the “Underwriting Agreement”) with Newbridge Securities Corporation (the “Underwriter”), relating to a firm-commitment underwritten public offering (the “Public Offering”), for the issuance and sale to primarily existing stockholders of the Company of 777,780 shares of common stock at a public offering price of $4.33 per share, less underwriting discounts and commissions, pursuant to our effective Form S-3, including the prospectus forming a part of the Registration Statement, as supplemented by a preliminary prospectus supplement, dated May 28, 2026, and a final prospectus supplement, dated May 28, 2026, each filed with the SEC.

The Public Offering closed on June 1, 2026.

Subsequently, on June 18, 2026, the Underwriter, pursuant to the full exercise of its over-allotment option, purchased 116,667 additional shares of common stock at a public offering price of $4.33 per share, less underwriting discounts and commissions.

We received gross proceeds of approximately $3.9 million, and net proceeds of approximately $3.4 million, as a result of the Public Offering and related over-allotment option exercise.

ATM Recommencement

On July 6, 2026, we filed a prospectus supplement to recommence our ATM program with Wainwright to sell up to $6,875,000 in shares of our common stock (the “Placement Shares”), pursuant to the Sales Agreement between us and Wainwright, dated July 17, 2025.

The issuance and sale of the Placement Shares by us under the Sales Agreement will be made pursuant to our Form S-3, as supplemented from time to time.

Private Placement

Newbridge Securities Waiver

On July 21, 2026, we received a waiver (the “Waiver”) from the Underwriter for certain restrictions on the sale of our capital stock as set forth in the Underwriting Agreement.

The Waiver became effective on July 21, 2026, and remained effective until the earlier of (i) the consummation of the Private Sale (as defined below) or (ii) July 31, 2026.

As a result of the consummation of the Private Sale, as described below, the Waiver terminated by its own terms.

Stock Purchase Agreement

On July 21, 2026, in connection with the receipt of the Waiver, we entered into the Private Purchase Agreement with the Investor, pursuant to which we sold and the Investor purchased 500,000 shares of common stock at a price per share of $3.54, for aggregate gross proceeds of $1,770,000 (the “Private Sale”).

Critical Accounting Policies

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These policies and estimates require the application of significant judgment by management.

These estimates can be materially affected by changes from period to period as economic factors and conditions outside of our control change.

These estimates can be materially affected by changes from period to period as

economic factors and conditions outside of our control change.

As a result, they are subject to an inherent degree of uncertainty.

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Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Highlights of our quarter financial performance are as follows:

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Cost of goods sold

Research and development

General and administrative

Operating expenses

Other income, net

Basic and diluted net loss per common share

For the Six Months Ended

(in thousands, except per share data)

Cost of goods sold

Gross profit (loss)

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Revenues and Gross Profit (Loss)

Consolidated revenues for the three months ended March 31, 2026 were $191 thousand compared to $401 thousand for the same period in 2025, which were predominantly generated by fulfilling orders related to mid-stream and boiler burner product offerings.

Revenues for the three months ended March 31, 2025 were predominantly generated from spare parts and engineering services offerings.

Gross profit decreased by $589 thousand, or 300.5%, for the three months ended March 31, 2026, compared to the same period in 2025.

Gross profit decreased primarily due to lower revenues and a $410 thousand increase in cost of goods sold expenses for a warranty accrual estimate adjusted during the three months ended March 31, 2026.

Consolidated revenues for the three months ended June 30, 2026 were $560 thousand compared to $133 thousand for the same period in 2025.

During the three months ended June 30, 2026 revenues were predominantly generated by delivering a portion of our flare system equipment order, fulfilling multiple spare parts orders and finalizing process burner CFD studies.

Revenues for the three months ended June 30, 2025 were predominantly generated by delivering spare parts orders to multiple customers and a boiler burner order.

Consolidated revenues for the six months ended June 30, 2026 were $751 thousand compared to $534 thousand for the same period in 2025.

During the six months ended June 30, 2026 revenues were predominantly generated by delivering a portion of our flare system equipment order, fulfilling multiple spare parts orders, finalizing process burner CFD studies, completing a boiler burner order and delivering midstream burners.

Revenues for the six months ended June 30, 2025 were predominantly generated by delivering spare parts orders to multiple customers, delivering a boiler burner, and successfully completing multiple CFD analyses.

Gross profit increased by $173 thousand, or 314.5%, for the three months ended June 30, 2026, compared to the same period in 2025.

Gross profit increased primarily due to higher revenues.

Our gross profit margin, for the three months ended June 30, 2026, experienced a modest 0.6% decrease compared to the same period in 2025, which was predominantly driven by a change in product mix.

Gross profit decreased by $416 thousand for the six months ended June 30, 2026, compared to the same period in 2025.

Gross profit decreased primarily due to a $410 thousand increase in cost of goods sold expenses for a warranty accrual estimate adjusted during the three months ended March 31, 2026.

The adjusted warranty accrual estimate related to process burners installed during the third quarter of 2025.

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However, a temporary adjustment to these burners was required to enable operational performance up to the maximum specified firing rate, which in turn affected burner compliance with our emission guarantees.

To establish our technology and customer service reputation within the market, we have established a warranty accrual estimate, that we believe, will provide for us to meet both our product guarantees and maintain our good standing with this customer.

Furthermore, gross profit also decreased by a change in product mix year-over-year driven by a decrease in spare parts revenue.

Operating Expenses

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Research and Development

R&D expenses decreased $198 thousand, or 44.3%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was predominantly due to receipt of $115 thousand in monies for cost-sharing expenses associated with a collaborative R&D project.

These monies were received in accordance with the terms of a

collaborative R&D agreement that we entered into during the fourth quarter of 2025, pursuant to which we agreed to test our boiler burner product using hydrogen fuel for the purpose of assessing its emissions and efficiency.

R&D expenses increased $201 thousand, or 81.4%, for the three months ended June 30, 2026, compared to the same period in 2025.

The increase was predominantly due to $100 thousand in subcontractor costs related to our DOE project.

As noted in “Note 11 – Government Assistance,” above, monies received from the DOE grant are recorded as other income under government assistance.

R&D expenses increased $3 thousand, or 0.4%, for the six months ended June 30, 2026, compared to the same period in 2025.

The increase was predominantly due to $100 thousand in subcontractor costs related to our DOE project described above, which were partially offset by $115 thousand receipt of funds for cost-sharing expenses associated with a collaborative R&D project.

General and Administrative

G&A expenses decreased $369 thousand, or 18.4%, for the three months ended March 31, 2026, compared to the same period in 2025.

G&A expenses decreased $368 thousand, or 22.4%, for the three months ended June 30, 2026, compared to the same period in 2025.

The decrease was predominantly due to $300 thousand in accrued legal fees during the prior period that were not present during the current period, which legal fees related to work performed by the former Special Committee to respond, manage and otherwise address attempts by several stockholders to submit director nomination notices in connection with our 2025 annual meeting of stockholders.

The decrease in year-over-year legal fees was partially offset by an increase of $139 thousand in legal fees associated with an advancement claim by the Former Directors (refer to “Recent Developments – Advancement Claim” above for further details).

G&A expenses decreased $737 thousand, or 20.2% for the six months ended June 30, 2026, compared to the same period in 2025.

The decrease was predominantly due to $750 thousand in year-over-year legal fees related to work performed by the former Special Committee.

The decrease in year-over-year legal fees was partially offset by an increase of $139 thousand in legal fees associated with an advancement claim by the Former Directors (see “Note 10 – Commitments and Contingencies – Litigation” for more information).

Other Income, Net

Other income, net decreased $92 thousand, or 50.8%, for the three months ended March 31, 2026, compared to the same period in 2025.

The decrease was predominantly due to a decrease in interest income from our short-term U.S.

treasuries and money market accounts of $71 thousand driven by a lower year-over-year cash balance and declining interest rates.

Other income, net, for the three and six months ended June 30, 2026 remained relatively consistent compared to the respective prior periods in 2025.

Liquidity and Capital Resources

At March 31, 2026, our cash and cash equivalents balance totaled $7,736 thousand compared to $9,178 thousand at December 31, 2025, a decrease of $1,442 thousand.

The decrease in the cash and cash equivalents balance is primarily attributable to our net loss of $2,190 thousand, which was partially offset primarily by a decrease in accounts receivables of $1,189 thousand.

At March 31, 2026, our current assets were in excess of current liabilities resulting in working capital of $6,609 thousand compared to $8,642 thousand at December 31, 2025.

At June 30, 2026, our cash and cash equivalents balance totaled $9,889 thousand compared to $9,178 thousand at December 31, 2025, an increase of $711 thousand.

The increase in the cash and cash equivalents balance is primarily attributable to $3,413 thousand in net proceeds from the issuance of common stock in connection with the Public Offering (see “Recent Developments – Public Offering” for more information), an increase of $315 thousand in contract liabilities driven by customer receipts and non-cash expenses of $327 thousand, which was partially offset by net cash used in operations.

Further, subsequent to June 30, 2026, we received an additional $1,749 thousand in net proceeds in connection with the Private Sale, which was consummated on July 22, 2026 (see “Recent Developments – Private Placement – Stock Purchase Agreement” for more information).

At June 30, 2026, our current assets were in excess of current liabilities resulting in working capital of $8,846 thousand compared to $8,642 thousand at December 31, 2025.

We believe we have sufficient cash and expected cash collections to fund current operating expenses for over twelve months.

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Until the growth of revenue increases to a level that covers our operating expenses, we intend to continue to fund operations in this manner, although the volatility in the capital markets may negatively affect our ability to do so.

As of March 31, 2026, approximately 2.1 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of our outstanding pre-funded warrants, and we may receive up to $22.4 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein.

As of June 30, 2026, approximately 2.1 million shares of our common stock are issuable upon exercise of our outstanding warrants, which number excludes the shares of common stock issuable upon exercise of our outstanding pre-funded warrants, and we may receive up to $22.4 million in aggregate gross proceeds from the cash exercises thereof, subject to certain beneficial ownership limitations set forth therein.

These warrants require the warrant holder to tender cash upon exercise, with the exception of the warrants issued to Public Ventures LLC as compensation for their services in connection with our public offering and concurrent private placement in April 2024, which allow the holder to exercise cashless if they so desire.

These equity financial instruments may from time to time fund future cash needs, but the volatility of our common stock price and the risk tolerance of warrant holders will determine the extent to which we will be able to raise funds in this manner.

Operating activities for the three months ended March 31, 2026, resulted in cash outflows of $1,348 thousand, primarily due to the net loss of $2,190 thousand and a decrease in other current liabilities of $180 thousand partially offset primarily by a decrease in accounts receivables of $1,189 thousand during such period.

Operating activities for the three months ended March 31, 2025, resulted in cash outflows of $1,111 thousand, primarily due to the net loss of $2,076 thousand partially offset primarily by non-cash expense of $118 thousand and an increase in contract liabilities of $814 thousand during such period.

The change in contract liabilities during the three months ended March 31, 2025, was impacted by customer collections for uncompleted orders as of March 31, 2025.

Investing activities for the three months ended March 31, 2026, resulted in cash outflows of $64 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the three months ended March 31, 2025, resulted in cash outflows of $41 thousand, which is primarily attributable to $37 thousand of disbursements for patents and other intangible assets.

Financing activities for the three months ended March 31, 2026, resulted in cash outflows of $32 thousand, which is attributable to disbursements related to taxes paid for the vesting of certain employee restricted stock units.

Financing activities for the three months ended March 31, 2025, resulted in cash outflows of $17 thousand, which is primarily attributable to $41 thousand of disbursements related to taxes paid for the vesting of employee restricted stock units, partially offset by $24 thousand in net proceeds received from the exercise of certain warrants.

Operating activities for the six months ended June 30, 2026, resulted in cash outflows of $2,584 thousand, primarily due to the net loss of $3,497 thousand, which was partially offset by an increase in accounts receivable of $986 thousand driven by customer billings, an increase in contract liabilities of $315 thousand driven by customer cash collections and non-cash expenses of $327 thousand during such period.

Operating activities for the six months ended June 30, 2025, resulted in cash outflows of $1,622 thousand, primarily due to the net loss of $3,756 thousand and a decrease of $967 thousand in deferred costs, which was partially offset by non-cash expenses of $245 thousand and an increase in contract liabilities of $2,495 thousand during such period.

Investing activities for the six months ended June 30, 2026, resulted in cash outflows of $89 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Investing activities for the six months ended June 30, 2025, resulted in cash outflows of $57 thousand, which is primarily attributable to disbursements for patents and other intangible assets.

Financing activities for the six months ended June 30, 2026, resulted in cash inflows of $3,381 thousand, which is primarily attributable $3,413 thousand in net proceeds from the issuance of common stock in connection with the Public Offering.

Financing activities for the six months ended June 30, 2025, resulted in cash outflows of $17 thousand, which is primarily attributable to $41 thousand of disbursements related to taxes paid for the vesting of certain employee restricted stock units, partially offset by $24 thousand in net proceeds received from the exercise of certain warrants.

Off-Balance Sheet Transactions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis